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tv   Nightly Business Report  PBS  October 12, 2015 7:00pm-7:31pm PDT

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this is "nightly business report," with tyler mathisen and sue herera. >> mega deals. dell buys emc in the biggest tech deal of all time, and anheuser-busch makes another bid. or is that a bud? or s.a.b. miller in what would be one of the biggest takeovers ever. blockbuster bust. eli lilly shares tank after it scrapped an experimental cholesterol drug that was once thought to have big potential. and $7 trillion target. why big investors are going after a sector that's been slow to innovate. the senior care market. all that and more tonight on "nightly business report" for monday, october 12th. good evening, everyone, and welcome. we begin with two mega deals. one that's done, another that's still developing. dell is buying emc for $67
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billi billion. making it the largest technology deal ever. the other deal isn't done quite yet. but anheuser-busch imbev just sweetened its offer for s.a.b. miller, hoping the higher price can seal the deal, and if it does it would be one of the largest takeovers of all time. so let's start with the tech tie-up, which we told you about last week when with was in theworks. it sent shares of emc higher today. dell is privately held. but is there a big risk to doing a big deal like this one, and which companies might be next? josh lipton has our report tonight. >> reporter: dell founder and chief executive michael dell will lead the combined company as chairman and chief executive. he says this deal creates an enterprise powerhouse. >> we started back in about 2002, and for about a decade worked together. at one point the relationship was about a $2 billion annual run rate.
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and this is really all about bringing fogt together complementary technologies and helping the customers address challenges and opportunities that this drijt digital future is creating. >> reporter: analysts say the i.t. hardware market which includes companies selling storage and servers still generates a lot of cash but the stock prices have come under pressure because of the threat from newer technologies like cloud computing. and that means this is a market ripe for consolidation. >> being bigger, being able to protect cash flows, reinvest some of thez cash flows, i think makes a tremendous amount of strategic sense given the stage we're at and frankly given the tipping point we see where some of the disruptions from cloud could start to accelerate now. >> reporter: one name to watch, net app. the data storage company he says is worth north of $35 per share in a consolidation scenario. net app in a statement to cnbc said that the deal-emc deal does
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not fundamentally change the competitive landscape and in fact could provide the company with a chance to take market share. of course big tech deals pose real risk. for instance, hp bought compaq in 2001 for $25 billion in a move meant to create a tech giant that could take on ibm. critics charge that the acquisition was ultimately a dud leading to a plunging stock price and thousands of layoffs. on the other hand, analysts are fans of facebook's decision to buy what's app for $19 billion. they see the messaging service potentially disrupting the telecom industry. despite the risk there is the expectation of more mergers in the i.t. hardware space. consolidation could make real sense for companies lacking growth but boasting plenty of cash and cheap valuations. for "nightly business report" i'm josh lipton in san francisco. and now to the potential deal that could create a beer
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behemoth, controlling nearly a third of the world's beer market. shares of anheuser-busch inbev did fall slightly today after it increased its offer for s.a.b. miller which trades over in london. but big hurdles still remain as an agreement could be hammered out and as morgan brennan explained, the clock is ticking. >> reporter: call it round 4. today a.b. inbev upping its price for s.a.b. miller as clock ticks down to a wednesday deadline. the world's biggest brewer raising its offer for its top rival to 43 1/2 pounds per share in ksh. plus shares in stock as an alternative for the largest stakeholders. that works out to an estimate 10d $3 billion in what would be one of the largest takeovers in history. a.b. inbev noting the proposal hinges on altria group and bevco the number two shareholder controlled by the santo domingo family opting for the partial share alternative which would include a combo of cash and
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stock. no word from s.a.b. miller which owns peroni and miller lite on this latest offer. but analysts say the key will be bevco agreeing to the new price. >> i think what the bid does is keep the door open for negotiations because at this pointinbev up until p th point they're proposing an offer. they haven't made a formal offer. and unless they get some level of detail and communication from s.a.b. they're not going to be able to do that. >> the higher offer comes after three previously rejected ones. at 42 pounds and 40 and 38 pounds after that. s.a.b. raise the its cost savings target to more thain billion dollars by 2020 a move meant to highlight its strength as a stand-alone company. now negotiations are getting down to the wire. according touchlt k takeover rules a.b. inbev which owns budweiser and stella artois have
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until noon eastern on wednesday stoub mitt a final bid or walk away for at least six months. unless s.a.b. miller asks for an extension to even negotiating. if a deal does emerge this week the proposed powerhouse would claim nearly a third of the global beer market with total annual sales estimated at upwards of $70 billion. the proposed transaction would then be likely to face intense regulatory scrutiny that could result in the divestiture of certain brands and certain markets including the miller coors business at s.a.b. miller owns in a joint venture with molson coors. for "nightly business report" i'm morgan brennan. >> so thirsty. and late today reuters reports that the department of justice is separately looking into allegation that's anheuser busch inbev tried to curb competition from craft brewers by buying up distributors. >> it's been a buoyant year so far for m & a deals but as we approach the end of the year will we see deal making pick up steam? managing director at harris williams, which specialize in m
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& a. he joins us now. jeff, welcome. nice to have you here. >> thank you very much. >> i guess one of the big questions is, one, what's fueling this m&a and does the end of the year necessarily represent kind of a deadline for some of these companies to do deals or could we see this trend continue into the new year? >> i'll start with the first point. in fueling the tremendous activity in m&a is really the availability of capital across many different sources, both for corporate and financial investors. that remains strong, and we expect it to continue to remain strong through the end of the year. certainly we expect deal flow to remain healthy in the fourth quarter but then continue into 2016. >> you know, i can see the reason for the emc dell deal. it seems like a classic sort of strategic partnership here. i can see the reasons for the s.a.b. inbev possible deal. but are these being driven by the desire to go out and buy or acquire growth or a desire to
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increase profitability by cutting expenses? or both? >> it's certainly all of the above. it is attractive to acquire revenue because their currency for acquisition, whether it's stock or cash or debt is very reasonably priced in the market today. so it's easy to make acquisitions. and also there's tremendous opportunity across industries to rationalize businesses, drive technology through them, and improve profitability. >> but jeff, a lot of people are pointing to this emc deal and also the beer deal as one of them would be the biggest takeover practically in history and the other is the biggest technology takeover deal and the world "bubble" comes to mind. do you see in tany frothiness ie
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market? >> i think it would be right to say we're at peak or near peak levels in m&a. instead of a bubble we'd call it a plateau. we've been at elevated m&a levels both in terms of volume and valuation of m&a deals for some time. what you're seeing is these larger transformational acquisitions. and we believe that this sustained period of strong m&a opportunity is reflecting out in bigger deals. if anything, these large deals reflect a buyer's belief that the broader economy will remain strong and they'll be able to make good on these acquisitions. we believe it's going to be a sustainable market. >> very interesting. thank you so much. jeff bestrong with harris williams. on wall street stocks began the week with gains as investors prepared for earnings reports from some of the world's biggest companies later this week. the dow jones industrial average rising now seven straight sessions, up 47 points today to 17,131. nasdaq gained eight. and the s&p 500 added a whopping 2. but the gains were capped as a
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drop in oil prices weighed on energy shares. >> and one reason for that decline in oil was a report from opec that showed a rise in output last month to a little bit more than a three-year high. the oil cartel also said it expects u.s. production to fall next year for the first time in eight years. by the settlement, domestic crude was down 5% to 47.10. >> and despite the decline in oil prices today, they have been rising steadily over the past month. but the energy markets are waiting for some key reports out of china this week. for clues on future demand from the world's top energy consumer. s seema modi now for why this week is an important one for investors across the globe. >> reporter: strong start to the markets but crucial data out of china could change the emerging markets story. starting with trade data tomorrow. a look at china's import-export picture will provide evidence on just how much economic activity is slowing. inflation on wednesday will tell
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us whether china is in fact dealing with a deflation problem and bank lending, a good indicator of how healthy the consumer is and whether they are taking out loans will come out by thursday. disappointing data could prompt the chinese central bank to introduce new stimulus measures, but the bigger concern is whether china will devalue its currency again to boost trade, a move that would reignite the global currency war fears. something washington is keeping a close eye on. some investors say the china fears are overblown and are recommending clients to look not only at china but indonesia and india for opportunities. >> looking at places like indonesia, india, and perhaps even china, there are some better macro stories, especially in india and indonesia. and again, these are big places. india's over a billion people. indonesia has hundreds of millions of people. they're growing at 4%, 5%, 6% a year. even china, perhaps even china has bottomed. >> reporter: and we'll learn
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more about china's overall economic growth when it releases gdp growth a week from today. in the meantime the chinese stock market the shanghai composite is trading at a seven-week high after a senior central banker from china said the stock market correction is "almost over." for "nightly business report" i'm see ma mody. >> as we mentioned the focus this week will be on earnings. big financial firms are set to report and investors will be paying attention since that sector has the second biggest weighting in the s&p 500. tomorrow we hear from jpmorgan. wednesday bank of america. and wells fargo. thursday citigroup and goldman sachs release their results. according to thomson reuters financial companies are expected to show earnings growth of more than 8% versus a decline overall for the s&p 500. and still ahead, as americans age, investors see big opportunity to the tune of a $7 trillion market and growing.
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shares of eli lilly had their worst day since 2008. the drug company is halting the development of an experimental cholesterol drug. the stock sank 7% after it was determined that the drug wasn't effective in a clinical trial. meg tirrell has more on this setback. >> reporter: tough day for eli lilly. the company stopping development of a big cholesterol drug that was in the last stages of clinical studies because an outside advisory board said it looked like the drug wasn't going to work. analysts had really focused on this as one of the most important pipeline products for lilly saying it could be a potentially $5 billion product if it was successful. this class of cholesterol drugs was thought to be important
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because you can take them by pill. as opposed to the big class that just got approved from amgen and rejenneron sanofi which are injectable drugs. there is another drug in 24 class known as cept inhibitors being developed by merck. in addition to lilly's stock getting hit today you did see a little bit of a read-through into merck as folks wondered if we'd see a similar negative outcome tore that drug. some positive read-through to those drugs from amgen and rejenneron sanofi as analysts said this removes a potential competitor to knows those. you did see the stocks of those companies going up. another company we should mention, asperion. another drug maker working on another kind of cholesterol drug aiming to lower bad cholesterol. initially that stock rose as well as the others from amgen and regeneron sanofi because folks thought it would lessen the competitive landscape. but as the day went on that stock fell as folks started to worry that company would need to do what are more known as
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outcome studies before getting approval of this drug. because this market is so big, mltz of patients in the united states, billions of dollars at stake, a lot of stocks moving on this big negative surprise from ely lilly. for "nightly business report" i'm meg tirrell. ferrari is getting ready to offer shares to the public. today fiat chrysler announced the launch of its ferrari spinoff and that it plans to sell a nearly 9% stake in the automaker in its initial public offering. the shares will price between $48 and $52. and will raise about a billion from investors. shares will trade on the new york stock exchange under the very apt ticker symbol race. meantime, standard & poor's downgrading volkswagen's credit rating citing the emissions scandal. the automaker's short-term corporate credit rating was cut to a-minus from a. the ratings agency will keep volkswagen on credit watch negative and request lower its rating even fourth. separately the volkswagen emissions scandal has also damaged germany's brand. according to a report by brand finance, germany has lost its
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position as the most powerful national brand with its value tumbling more than $190 billion. ford announcing a major invest in china, and that is where we begin tonight's auto focus. the automaker intends to invest nearly 2 billion over the next five years into smart cars in china, an area where it has seen sales decline. ford hopes that new features such as smartphone connectivity and control will help it better compete against growing competition. shares of ford off earlier in the day, but they ended a penny higher at $14.98. norwegian cruise lines also planning to invest in its chinese business. the company is developing a ship that will cater especially to chinese customers. the 4,200-passenger ship should set sail in mid 2017. and shares of norwegian were up more than 3% today to 59.79. the oil refiner phillips 66 unveiled its 2016 capital budget today, and it plans to spend a billion less than this year.
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the company also intends to boost its buyback program by $2 billion. shares of phillips higher today by a little bit at 83.87. general electric is in talks with wells fargo to have that bank purchase more than $30 billion in loans, and that's according to a reuters report. in april the company announced it was looking into selling 200 billion in assets as it looked to focus more on its core manufacturing businesses. shares of both companies were flat today. ge closing at 28.09. wells fargo at 52.18. twitter is reportedly set to announce a cost-cutting plan that includes some layoffs. this news comes days after jack dorsey was named permanent ceo of the company, which has seen its shares fall sharply over the past year. on the news shares were off almost 7% to 28.74. and ryder systems cutting both its third quarter and full-year earnings forecast, sending shares of the truck rental company down sharply after the bell.
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the company said earnings were hit partially by an unexpected number of out of service vehicles in that quarter. shares initially fell 6% on the news but then closed the regular session down just a fraction to 75.65. sue, gas prices didn't move much over the past two weeks. according to the lundberg survey the average price of a gallon of regular gas dropped a half a cent to $2.34. the slowing decline is attributed to the rise in oil prices in recent weeks, but prices are still down, that is, on gasoline more than 90 cents a gln fr gallon from a year ago. >> and it's partially because of those low gas prices that social security recipients will not get an increase in benefits next year. the annual cost of living adjustment is based on a government measure of inflation, which is down because of the drop in gas prices. this is just the third time in 40 years that there will be no rise in benefits. the official announcement will be made later this week. senior care in the u.s. not
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surprisingly a booming $7 trillion market, but it has been slow to change. investors, however, are betting big now and are looking at ways to innovate and invest in this growing niche market. katie fike is a partner at generator investors and co-founder of aging 2.0. she's one of those investors and joins us now. katie, welcome. thank you for being with us. aging 2.0 is called an accelerato accelerator. tell me what an accelerator does and in what sectors of this sort of aging market you're finding the greatest values. >> sure. there's accelerators in other industries and we really were the first to set up one in ageing and senior care. we really work with them closely to help them understand the insights they need to address this market as well as how to refine their product and think about messaging, usability and design. then we help them with distribution and partnerships to help them get to squal and we also help them with funding. so it's really about finding
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these entrepreneurs who are work on these really important areas and helping them get to market faster. they're working on a broad range of things from cognitive impairment to falls to medication management to help them stay independent. >> exactly. because it's complicated, isn't it? a lot of those who are aging don't want to or can't afford to go into assisted living facilities, they'd rather stay in their homes. then you have the wearable niche. it's a very complicated and multilayered area you're invested in. >> it really is. that intersection of ageing and technology is very -- you have to be very careful about how you do it. senior care has traditionally been very high touch and low tech. and into the deuce technology we have to be very thoughtful about how we can create high-tech but also high touch solutions. and usability and design are really critical. and just getting the entrepreneurs closer to who they're designing for, most of the entrepreneurs are in their 20s, 30s, and 40s, designing for problems they're not
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experiencing. so we have to bridge that gap. >> what are you seeing -- this is obviously a finance and business show. what are you seeing that is in the pipeline or out there already that could help the aging population manage their money? because it's very complicated stuff, and sometimes that's an area where control issues come into play, with children and so forth. what are you seeing there? >> i think one of the companies that actually was in our first accelerator program called true link financial, they developed a debit card to help protect against financial elder abuse, which is obviously a huge problem for this population, especially if cognitive impairment starts to come into play. it gives more transparency to the family around spending, around being able to set limits, perhaps about donations or how much someone could spend with certain types of vendors. so i think transparency and letting family, even if they're spread out, have more insight into what's being spent where. and that could be either with direct solutions like true link or other more broad solutions like online banking or mint.com
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that help you all get a view into where the money is coming and going. >> fascinating in a growing market. katy fike, thank you very much, with generator ventures and aging 2.0. and coming up, why some americans don't feel as optimistic about the economy as they once did. but first, how commodities and currencies fared today. the bond market was closed for the columbus day holiday. two federal reserve policy makers today suggested that a december rate hike is possible as long as the data doesn't disappoint. atlanta fed president dennis lockhart said that he expects the central bank to raise interest rates this year. separately, chicago fed president charles evans said as long as the increases are gradual he could be persuaded to support a r5i9 hiate hike this .
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ends previously said he would prefer to wait till next year. both evans and lockhart are voting members of the central bank. >> how do average americans opposed to fed presidents feel about the economy and the stock snarkt if they feel good they tend to spend more. if they don't they may put off purchases. steve liesman asked that question to people across the country in his quarterly all america economic survey. >> the plunge in the stock market and weaker growth in the u.s. and abroad look to have taken a toll on optimism in america according to the latest cnbc/all america economic survey. the poll of 800 americans found views on the current state of the economy about stable. but 32% of americans now say the economy will get worse. up six points from the last survey. and the highest levels since the government shutdown in 2013. a fifth think the economy will get better. that's the lowest level since 2008. >> we've been on the upswing for the past few quarters and we're now on a very clear downswing with a pretty significant net negative set of feelings among the public right now.
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the significant drop-off in optimism for the future is surprising given the ongoing sort of slow incremental increases in improvements in the economy. but people are clearly not feeling it entirely yet. >> reporter: lackluster growth and the recent stock market dive look to be weighing on sentiment. 46% of the public say this is a bad time to invest in stocks. a 12-point gain from the june survey. attitudes eroded among the wealthy and those with considerable sums in the stock market. >> the very rapid decline in stocks certainly is going to shaky think people's decision to buy big ticket items. it certainly impacted the fed's decision not to raise rates. >> reporter: the danger is that these negative sentiments continue into the critical christmas selling season. the optimistic view, lower gas prices combined with a turnaround in stocks and jobs to settle things down before consumers go shopping in earnest. for "nightly business report" i'm steve liesman. >> so we wanted to know how you feel about the economy and your
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own prospects. so we took our cameras outside to find out. >> i just don't know if the jobs that are being created are what people want. >> i think it's stabilizing right now. i'm working as a recruiter, and it seems like there are more jobs available. for a while there were fewer jobs in general and people were really struggling, but i think things are moving up at least in my sector. >> in the '90s compared to today my salary has dropped as far as working. and finally tonight, the nobel prize in economics was awarded to a princeton university professor. angus deaton is one of the leading experts on poverty and has done research in india, south africa, and other parts of the developing world. after being honored deaton says he foresees a decline in poverty but is concerned about upward trends in inequality. back to the preceding story there, i think the political uncertainty going into the election year also causes people to feel less confident
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economically. >> absolutely. they want to know who's going to be running the country. congress isn't getting a lot -- a lot of turmoil. >> on the horizon. >> i agree. that does it for "nightly business report" for tonight. i'm sue herera. thanks for watching. >> and i'm tyler mathisen. thanks from me as well. have a great evening, everybody, and we will see you right back here tomorrow night. ♪
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